The Bramshill Income Performance Strategy returned -2.05% in March, bringing year-to-date performance to -0.34%.
Fixed income markets were influenced by escalating geopolitical tensions surrounding the Iran war, resulting in a rise in treasury yields which drove negative returns across most asset classes, highlighted by Corporates (LQD) down -2.07% and Preferreds (PFF) off -3.37% for the month. Heightened conflict contributed to higher energy prices and renewed inflation concerns, leading markets to reassess the path of monetary policy. Credit markets were generally resilient despite the backup in rates. Spreads experienced modest widening in select areas, particularly within longer duration securities, creating more attractive entry points for income-oriented investors. We believe growth will be more impacted by the recent Middle East conflict than long-term inflation. The Strategy’s negative performance during the month was primarily driven by the impact of rising Treasury yields on duration-sensitive holdings. However, security selection within investment grade credit and select preferred securities provided partial offset. The portfolio remains focused on high conviction opportunities where risk-adjusted income remains attractive, with an emphasis on issuer fundamentals and relative value across sectors. During the month, we actively adjusted portfolio positioning to take advantage of improved valuations driven by the rise in rates and modest spread widening. Within investment grade credit, we increased exposure from 47% to 49%. We added to junior subordinated utility and energy securities, including new positions such as Sierra Pacific, a Berkshire Hathaway Energy operating company BRKHEC 6.375% and added to existing holdings in issuers such as Phillips 66, Dominion, and NextEra. These securities offer attractive yield profiles, including coupon floors, and we believe they provide compelling risk-adjusted income in the current environment. We modestly increased high yield exposure to 5% through the addition of a junior subordinated utility security issued by Emera EMACN 6.85%, also featuring a coupon floor. We remain cautious on high yield as the private credit and BDC markets are experiencing stress and this will likely impact the performance of lower quality high yield credits. In preferred securities, we reduced exposure from 14% to 12% of the portfolio by trimming positions in agency mortgage REIT preferreds such as AGNC and Annaly. We selectively added to certain higher quality bank preferreds, including BK 7.166% PFD. Our long-term treasury allocation remained stable at 20%, providing ballast against risk assets and maintaining liquidity within the portfolio. Cash and short-term Treasuries were modestly reduced to 13% as we deployed capital into higher yielding opportunities, though we continue to maintain significant dry powder. Municipal exposure remained limited, with a small addition to a closed-end fund during the rate-driven selloff. Looking ahead, we believe the environment will continue to present attractive opportunities for active managers. While uncertainty around monetary policy, inflation, and geopolitical developments may persist, we expect continued dispersion across sectors and issuers. In this context, we remain focused on selectively deploying capital into securities where yields have improved and structures offer downside protection, while maintaining a balanced approach to income generation, liquidity, and risk management.
This commentary is provided by Bramshill Investments, LLC for information purposes only and may contain information that is not suitable for all investors. Certain views and opinions expressed herein are forward-looking and may not come to pass. Investing involves risk, including the potential loss of principal. Past performance may not be indicative of future results, which are subject to various market and economic factors. No statement is to be construed as an offer to sell or a solicitation of an offer to buy securities or the rendering of personalized investment advice. Stated performance is reflective of realized/unrealized capital gains/losses and investment income achieve in composite accounts, net of investment management fees and expenses for trading, custody and fund maintenance (where applicable). Returns reflect the reinvestment of dividends and other such distributions and performance for January 2009 through April 2012 depicts actual returns generated by the strategy while managed by the Firm’s Chief Investment Officer at an unaffiliated investment firm. All information is accurate as of the date of publication and is subject to change without notice.
